Every great startup ecosystem from Tel-Aviv to Silicon Valley to Wall Street was created, fueled, and scaled by Angel investors. Without the angels, there are no miracles. Throughout history, angel investors were the creators of industries and progress. They are the risk-takers, the visionaries, and the believers. Without Angels investors there is no startup ecosystem anywhere. Period.
Data shows that 80% + of all venture deals are being funded by Angels Investors. So you can imagine how critical there are to any business ecosystem. The higher Angel’s activities, the higher the VC activities, the more PE deals are being made, it is that simple. Also, just a reminder that small businesses, startups among them are responsible for about 90% of all job creation in the US.
Getting to my point, in Michigan which is one of the nation’s wealthiest states, it is reported that more than 50% of all startup companies born in the state, especially in the technology space, end up leaving the state. Why you should ask? Well, they can’t find early-stage capital, so they say. Period. Not because the money is not available, it is because it is not being deployed, ie.. a large amount of personal wealth is sitting on the sidelines and not participating. Although there was much progress made in the past 5 years alone, the state of Michigan with regards to Angel Funding is way behind, way, way behind, not even on the map in comparison to other markets such as Palo Alto, Austin, New York, and Chicago just to mention a few.
My assertion from many conversations I had in the past 24 months with numerous individuals that are considering this asset class and some Angels investors “in the making” that just do not know where to start, is that they just stand still, not moving. They take the mindset of the best action is no action.
So, here is what we are recommending.
- The first choice, select and put your money in a fund, you will get the best risk profile and best bang for the buck, and the fund does all the heavy lifting.
- The second choice is to join an Angel Syndication/Group. You will pay the membership and reduce your operating cost dramatically, You will be in a group with other Angels you can learn from and be supported by – the crowd wisdom effect.
Although this asset class is being described as high-risk, high-reward, my experience tells me that if you are doing it right with the right people, it is not that risky after all. Especially in today’s market condition when the stock market is not stable, unpredictable, and risky and will continue to be for a while and real estate is collapsing across the board, venture investing is a very attractive alternative asset class.